Fitch Downgrades Ratings of Jefferson Pilot Following Acquisition.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded the ratings of Lincoln JP Holdings LP (formerly Jefferson Pilot Corporation) and its subsidiaries. (A list of the affected ratings can be found below.) The ratings are removed from Rating Watch Negative. The Rating Outlook is Stable. Today's rating action follows the completion of Lincoln National Corp.'s (LNC LNC Legal Nurse Consultant LNC Libertarian National Committee LNC Low Noise Converter LNC Lloyd Noble Center (University of Oklahoma, Norman campus) LNC Local Node Clock LNC Chief Legalman (Naval Rating) ) acquisition of Jefferson Pilot Corporation, which was announced on Oct. 7, 2005. At that time, Fitch issued a Rating Action Commentary affirming all ratings of LNC and placing all ratings of Jefferson Pilot Corporation on Rating Watch Negative. Fitch indicated that all Jefferson Pilot ratings would be lowered to the equivalents of LNC when the transaction was completed. LNC, as the acquiring entity, will finance the transaction with approximately $5.5 billion in stock and $1.8 billion in cash. The cash portion of the purchase price is expected to be funded with debt and hybrid securities Hybrid Security A security that combines two or more different financial instruments. Notes: Hybrid securities generally combine both debt and equity characteristics. . Fitch believes that the strategic benefits of the proposed merger outweigh out·weigh tr.v. out·weighed, out·weigh·ing, out·weighs 1. To weigh more than. 2. To be more significant than; exceed in value or importance: The benefits outweigh the risks. the integration challenges associated with combining two similarly sized companies, both with long histories of operating independently. Fitch anticipates significant distribution and expense benefits to develop from the increased scale that will be accomplished with the combination. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, the combined organization would have reported nearly $161 billion in total assets on Dec. 31, 2005, and $9.7 billion in revenue for 2005. Fitch believes that the merger will strengthen the combined company's competitive position in the individual life insurance business and expand and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. distribution capabilities. In addition, Fitch expects the product profile of the combined organization to result in enhanced risk diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. relative to the separate companies' existing product profiles. Currently a considerable portion of LNC's earnings are derived from products whose profitability depends to a great extent on equity market performance. In contrast, Jefferson Pilot's product profile has historically been weighted much more heavily toward life insurance and fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. . LNC's high ratings reflect the company's longstanding strong competitive position in the life insurance industry, solid capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , good quality asset portfolio, excellent financial flexibility, and strong operating performance. Factors that partially offset these positives include challenges that LNC faces with respect to strong competition in the life insurance and asset accumulation sectors, particularly in the affluent market segment that LNC has targeted, and the degree to which the company's earnings are leveraged to the equity markets. In addition, the rating considers the heightened level of regulatory pressures on participants in the insurance industry. Lincoln National Corp., headquartered in Philadelphia, PA, markets a broad range of insurance and asset accumulation products and financial advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal primarily to the affluent market segment. On Dec. 31, 2005, the company reported consolidated assets of $125 billion, common equity of $6.4 billion, and $324 billion of individual life insurance in-force. For 2005, LNC reported consolidated net income of $831 million. The following ratings have been downgraded by Fitch, removed from Rating Watch Negative, and assigned a Stable Outlook: Lincoln JP Holdings LP (formerly Jefferson Pilot Corp.) --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) to 'A+' from 'AA' --$300,000,000 4.8% senior notes due Jan. 27, 2014, to 'A' from 'AA-'; --$300,000,000 monthly extendible notes (EXLS) due Feb. 17, 2011 to 'A' from 'AA-'; --EXLS to 'F1' from 'F1+'; --$200,000,000 8.14% capital security due Jan. 15, 2046, to 'A-' from 'A+'; --$100,000,000 8.29% capital security due Mar. 1, 2046, to 'A-' from 'A+'. Jefferson-Pilot Life Funding Trust I --$300,000,000 floating rate notes due June 2, 2008, to 'AA' from 'AA+'. The following subsidiaries' insurer financial strength ratings have also been downgraded to 'AA' from 'AA+' by Fitch, removed from Rating Watch Negative, and assigned a Stable Outlook: Jefferson-Pilot Life Insurance Company Jefferson Pilot Financial Insurance Company Jefferson Pilot LifeAmerica Insurance Company The following rating has been withdrawn by Fitch: Lincoln JP Holdings LP (formerly Jefferson Pilot Corp.) Commercial paper rating of 'F1' Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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